Why worry about having a low domestic exchange rate?

There has been a lot in the news recently about the weak exchange rates of countries such as Brazil and India, mainly as a result of the impeding action being taken by the Federal Reserve (US Central Bank) to taper its Quantitative Easing scheme (that is to say, they will be reducing the amount of money they pump into the economy). The reason for this, is that US investors who were using QE dollars to speculate in the Indian and Brazilian economy’s, are now removing some of that money in order to place it in other US bonds which are expected to increase in yield. [...]

US Default

There has been a lot in the news recently about the possibility of a US default – what does this mean? A default is a term used for when a country refuses to pay its debt. Generally this is because they can no longer afford to, however there could be other reasons, e.g. a change of government brings in a socialist regime whose policy was to default. A default may not be of the entire debt, debtors may be required to take a ‘haircut’ – which is considered a default – meaning they wont be paid back the entire amount they are owed. [...]